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Walz pitches Minnesota paid leave program

Paid family and medical leave is a top priority for Democratic lawmakers in the 2023 legislative session.

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Unity Cafe owner Cherno Jome takes coffee orders from Minnesota Gov. Tim Walz, Department of Employment and Economic Development Director Steve Grove and Lt. Gov. Peggy Flanagan on Tuesday. Jome hosted state officials for a news conference on a paid family and medical leave plan moving through the Legislature.
Alex Derosier / Forum News Service
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ST. PAUL — Gov. Tim Walz and other state officials made their pitch Tuesday for a proposed paid family and medical leave program in Minnesota, a top priority for Democrats who assumed full control of state government at the beginning of January.

Addressing reporters at the Unity Cafe on Rice Street near the Capitol in St. Paul, Walz said the program would help a majority of Minnesotans who do not currently have paid leave for medical and family reasons. He also argued better leave options could help Minnesota become a more attractive option for employees as the state tries to address workforce shortages.

During the pandemic, federal programs affected tax status for people with student loans as well as the hospitality industry.

“The benefit to Minnesota is we don’t only improve individual lives, (but also) we improve the broader community and the workforce that’s there,” he said. “You hear stories, whether it’s work or injury or pregnancy or cancer treatments. “It gets almost unimaginable that somebody would have to leave work and not have the capacity to be able to go and get the treatment they need.”

Unity Cafe owner Cherno Jome, who works two other jobs in addition to running the cafe, said he suffered a pinched nerve a few years ago in a car accident, but does not have any good options to take time off for back pain treatment.

“Even though I'm in a lot of pain every day, I can’t afford to address my injury without serious thought about the consequences for my business,” he said, adding that short-term disability would not be enough to cover his needs. Jome is a member of the Mainstreet Alliance, a progressive small-business owners group pushing for the leave program in the Legislature.

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The current paid leave proposal being advanced by Democratic-Farmer-Labor lawmakers would offer up to 12 weeks of partially paid time off for family reasons such as a new child or a seriously ill or dying relative. It would also provide up to 12 weeks of medical leave, including for pregnancy complications.

A previous DFL plan called for up to 12 weeks of paid leave for family and medical reasons. Republicans opposed creating the program, which would create a new tax.

Department of Employment and Economic Development Commissioner Steve Grove said the program would likely create a payroll tax of 0.7%, which could be shared by employers and employees. Taxes would go into a state-administered fund. That’s slightly more than the 0.6% split between employer and employee previously touted by Democrats.

Employers and employees would contribute about $3 per week, and the amount of pay a beneficiary receives would be based on a sliding scale tied to earning level. Workers could get up to 90% of their wages while on leave, depending on their income.

Past projections have shown the state would collect $840 million each year in new taxes to fund the program, though business groups estimated in December that it would be closer to $1 billion.

Past estimates from nonpartisan legislative research estimate the program will initially cost about $1.7 billion to launch, though the governor may call for a different amount when he releases his budget this January. Grove said his agency would have to create a new office and system to administer the paid leave program. It’s estimated the new division would require 300 or more employees.

Many other states have collected taxes for a year or so before launching their programs, Grove said, but with the state’s historic $17.6 billion surplus, DFL lawmakers and the governor are discussing using those extra funds to help make benefits available sooner.

Businesses that already have a paid family and medical leave program would be able to opt out of the state program, but they’d have to pay a fee for doing so, Grove said.

The governor said more specific details on the plan will emerge when he unveils his budget recommendations later this month. The Walz administration must provide recommendations to the Legislature by Jan. 24.

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When Republicans controlled the Senate, the DFL version of the paid family and medical leave proposal never got a hearing. GOP and business leaders have said the state should focus on general tax relief.

Minnesota’s chapter of the National Federation of Independent Business opposes the bill, citing concerns the program will burden the small businesses it represents. Further, the organization argued the program’s costs could potentially grow well beyond initial projections after launch.

“This massive new mandate on small business presents major problems at a time when many are struggling to recover from the pandemic and ensuing economic headwinds,” NFIB Minnesota State Director John Reynolds said in a statement. “The $1 billion tax will eat into small businesses’ shrinking bottom lines, 24 weeks of leave will exacerbate the worker shortage, and small employers face ruinous penalties for program violations.”

Eleven states and the District of Columbia have paid family leave, according to the National Conference of State Legislatures.

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This article was edited at 9:35 p.m. on Tuesday, Jan. 10 to clarify that the $1.7 billion estimate for the program start-up comes from past legislative research. The governor will release his desired amount later this month.

Alex Derosier covers Minnesota breaking news and state government for Forum News Service.
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